Silicon Valley's Siege of Higher Ed

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The new tech boom in the Bay Area isn't just driving up rents in San Francisco; it's also driving up anxiety levels at America's universities, and for good reason:

According to the National Venture Capital Association, investment in education technology companies increased from less than $100 million in 2007 to nearly $400 million last year. For the huge generator of innovation, technology, and wealth that is Silicon Valley, higher education is a particularly fat target right now.

The above comes from a terrific new piece by Kevin Carey just published by my old shop, The Washington Monthly.There's been a lot of writingrecently about the rise of so-called "massively open online course" (MOOC) platforms like Coursera, Udacity, and Edx, but Carey's piece offers something bigger: a sweeping look at the whole army of tech innovators who are gathering outside the gates of the modern American University, rattling their spears and itching to compete with the old-line incumbents.

Even though this army is fractious, it does have its field generals -- venture capitalists -- as well as certain organizing principles, folkways, and battle strategies, which Carey does a delightful job of drawing out and describing. Just one example: because tech capital costs have gotten so low, VC firms are increasingly throwing small quantities of money at a big spread of startups in the broad category of education, stoking them all so that the weak ones can "fail faster" and the strong ones can hurl themselves at the gates of academia iterate, iterate, iterate.

Higher education has resisted transformation for ages, but Carey comes away thinking that, sooner or later, with this onslaught, it's inevitable that the walls will be breached and old business models will collapse.

OK, enough of the seige metaphor. Why is all this important? Because American higher education is sick. It has a what some people call a "cost disease" -- and a particularly virulent case of it. As Victor Ferrall wrote on our site the other day, unlike sensible industries where competition between firms for customers exerts a downward pressure on prices, higher education is an industry where colleges compete for customers by raising their prices. Given the growing economic indispensability of a college education, this amounts to a national crisis (we are a country stewing in more than $1 trillion of student debt). It also amounts to a giant business opportunity for the barbarians at the gates. What we might stand to lose in the siege is another topic for another day.